6 Investment Lessons Learned From Hosting ‘WealthTrack’

Public television's Consuelo Mack marks her show's 10th anniversary

As Consuelo Mack WealthTrack marks its 10th anniversary on public television, we are amazed, grateful and wiser. Our WealthTrack team and audience are a decade older, or as we view it, 10 years closer to retirement!

We have been through a housing and stock market boom and bust, a period of strong economic growth followed by the worst financial crisis since the Great Depression, an historically tepid recovery and a series of rolling global crises that continues to this day.

What have we learned? I think there are six key lessons for investors:

Lesson 1: Expect the unexpected. The “unthinkable” can happen! Housing prices can reach the sky and create instant real estate millionaires, as it did up until 2008 (reminiscent of the internet bubble in the 1990s). On the flip side, fortunes can be lost overnight, mighty firms can go out of business and — in a crisis — the government can do things it has never done before.

Lesson 2:Don’t get swept up by these periodic market manias. Take a deep breath, step back, stay on your predetermined course and make only minor adjustments. When everyone is buying, sell some. When everyone is selling, buy some.

Individual investors have a sad history of underperforming the stock market and the very mutual funds they invest in.

As legendary investor Sir John Templeton counseled: Buy in periods of maximum pessimism and sell in periods of maximum optimism.

Lesson 3:Take advantage of the power of compounding. Albert Einstein has been widely quoted, or possibly misquoted, for calling the power of compound interest “the most powerful force in the universe.” It certainly is in the investment universe.

The force of compounding dividends, interest and capital gains in a mutual fund or Exchange Traded Fund (ETF) — especially with dividend paying stocks — is huge. According to Vanguard, a hypothetical $10,000 investment earning 6 percent a year (that’s $600 annually reinvested) would be worth $30,627 at the end of 20 years and $102,857 at the end of 40 years.

Lesson 4:Put the power of diversification to work for you. During the past decade when U.S. large-cap stocks did extremely well, $10,000 invested in the S&P 500 in 2005 with dividends and capital gains reinvested would now be worth $21,377. But a $10,000 stock portfolio invested equally in indexes representing the S&P 500, plus U.S. small company stocks, U.S. midsized company stocks, foreign developed country stocks and emerging market stocks would be worth even more: $21,856.

Just diversifying a stock portfolio, let alone an entire retirement portfolio of stocks, bonds, cash, real estate securities and commodities, can make a difference.

Lesson 5: Avoid the underperformance trap. Individual investors have a sad history of underperforming the market and the very funds they invest in. Case in point, a famous Morningstar study which found that the top performing fund of the 2000 to 2009 period earned more than 18 percent annually, while the market was down close to 1 percent per year. But the average investor in that fund lost 11 percent per year over that same period.

The primary reason was that individual investors tried to time the market and the fund. Almost inevitably, they bought at the market high and sold at the low.

Lesson 6:Take full advantage of at least one source of guaranteed income for life. With the demise of traditional pension plans, we are on our own and have to create our own income streams for life.

The most obvious one is Social Security and there are several ways to significantly maximize your Social Security benefits. It’s worth calling or going to your local Social Security office to find out what they are or paying a modest fee to the website SocialSecuritySolutions.com and obtaining advice based on your profile.

An additional option for income that will last a lifetime is to look at annuities — you give a financial firm a chunk of money, which will invest it and pay you a monthly income. The most basic immediate fixed annuity can provide a source of monthly income starting in retirement, while deferred income annuities start paying income at 80 or 85 — that’s why they are aptly called longevity insurance.

Ten years in, at WealthTrack, we believe even more strongly than when we started that building financial security to last a lifetime is an achievable goal through disciplined, diversified, long-term investing.

We also recognize that it is really hard to do, which is why we recommend consulting a Certified Financial Planner at least once, to create a personal plan you can stick to over the years and help you secure your future.

Consuelo Mack is the anchor and executive producer of CONSUELO MACK WEALTHTRACK, a weekly series devoted to long-term diversified investing airing nationally on public television (check local listings). She was formerly Anchor and Managing Editor of "The Wall Street Journal Report."@ConsueloMack